new fall season program info€¦ · director of nonprofit services, bdo seidman, llp, and richard...

July-August 2009

Issue FourVolume Ten

FAR’s upcoming season looks like a great opportunity to attend another series of interesting

presentations. (See the list to the right for the entire line-up). Members of the program committee are finish-ing their efforts to provide program descriptions and speaker information for the entire year, which we should have for the September issue. But we wanted to give you the fall line-up!

FAR will kick off the program year on September 23rd with “Revisiting Form 990: How Did You and Your Organization Survive the First Year?” Anthony A. Cuozzo, Jr., CPA, CGFM, Senior Vice President, Councilor, Buchanan & Mitchell, P.C., CPAs, will moderate a panel. Other panel members are: R. Michael Sorrells, CPA, Tax Partner, Cherry, Bekaert & Holland, Joyce Underwood, CPA, Director of Nonprofit Services, BDO Seidman, LLP, and Richard J.

new Fall SeaSon Program InFo

(continued on page 17, fall season)

marK YoUr

CalenDar(and read in advance)

September 23, 2009regUlar monTHlY meeTIng,

11:15 a.m. to 1:30 p.m. at SunTrust Bank, 1445 New York Avenue, NW, 9th Floor, Washington, DC 20005.

“Revisiting Form 990 – Did You Survive the First Year, ” Anthony A.

Cuozzo, Jr., CPA, CGFM, moderator with panelists: R. Michael Sorrells, CPA, Joyce Underwood, CPA, and

Richard J. LoCastro, JD, CPA.

october 21, 2009regUlar monTHlY meeTIng,

“How to Use Social Media to Connect, Communicate and Collaborate”

november 18, 2009regUlar monTHlY meeTIng, “HR Trends and Issues in the Work-

place.”

FAR members look forward to the terrific programs planned for the next season. Many attend every month and suggest to other finance and administrative professionals that they should attend.

Far announces Program Schedule for 2009-2010

The FAR program committee has put together a great schedule for the 2009-2010 program year (based on a survey of the FAR membership). Mark your calendar now to save the dates:

September 23, 2009:Revisiting the Form 990: Did You and

Your Organization Survive the First Year?

October 21, 2009:How to Use Social Media to Connect,

Communicate & Collaborate

November 18, 2009:HR Trends and Issues in the Workplace

December 9, 2009:Holiday Party

January 20, 2010:Updating Internal Auditing Controls

for Today’s Challenges

February 24, 2010:How to Use Technology to Improve

Your Organization

March 24, 2010:Hot Topic in the News

April 28, 2010:State of the Non-Profit Industry

May 19, 2010:The Effect of Audit Standards on the

Non-Profit Industry

June 23, 2010:Tax and Legal Update – Annual Review

2

CHaIr’S ColUmn

leFToverS...

“Very well, Briggly, I’ll tell you why you’ve been passed over for promotions!”

2008 - 2009 Board of DirectorsFinance & Administration Roundtable Craig Silverio, Iom, Cae, ChairPackaging Machinery Manufacturers Institute 4350 N Fairfax Drive, Suite 600 Arlington, VA 22203-1619 Phone: 703-243-8555 Email: [email protected]

lou novick, Past Chair The Novick Group, Inc. One Church Street, Suite 400 Rockville, MD 20850 Phone: 301-917-6558Email: [email protected]

Thomas nordby, Cae, vice Chair National Defense Industrial Association 2111 Wilson Blvd., Suite 400 Arlington, VA 22201-3061 Phone: 703-247-9461 Email: [email protected]

wes Tomer, CPa, Secretary Veris 11710 Plaza America Drive, Suite 300 Reston, VA 20190 Phone: 703-654-1450 x1457 Email: [email protected]

Barbara Studenmund, Treasurer Association of American Law Schools 1201 Connecticut Avenue, NW, Suite 800 Washington, DC 20036 Phone: 202-296-6474Email: [email protected]

Patricia adkins, Director Home Safety Council 1250 I Street, NW, Suite 1000 Washington, DC 20005 Phone: 202-330-4905 Email: [email protected]

Kristen l. Conte, Director Eugene & Agnes E. Meyer Foundation 1400 16th Street, NW, Suite 360 Washington, DC 20036 Phone: 202-552-7450Email: [email protected]

Peter Frank, CPa, Director Association of Home Appliance Manufacturers 1111 19th Street, NW, Suite 402 Washington, DC 20036 Phone: 202-872-5955 x312 Email: [email protected]

James n. may, CPa, Director National Association of Student Financial Aid Administrators 1101 Connecticut Avenue, NW, Suite 1100 Washington, DC 20036 Phone: 202-785-6941 Email: [email protected]

robyn l. morriss, Cae, Director Reinsurance Association of America 1301 Pennsylvania Avenue, NW, Suite 900 Washington, DC 20004-1701 Phone: 202-638-3690Email: [email protected]

Susan Staton, CPa, Director Association of American Universities 1200 New York Avenue, NW, Suite 550 Washington, DC 20005-3928 Phone: 202-408-7500 Email: [email protected]

michael Tryon, CPa, Director Tate & Tryon 805 15th St., NW, 9th Floor Washington, DC 20005 Phone: 202-293-2200 x 305 Email: [email protected]

Far roundtablec/o JMP Productions

6277 Franconia RoadAlexandria, VA 22310-2510Phone: 703-971-1116Fax: 703-971-7772E-mail: [email protected]: www.FAR-Roundtable.org

Editor—Jack Pitzer/Assoc. Editor—Dixie Kennett

I hope this column finds you and your

families and your organizations do-ing well!

While the July-August months are normally quiet for FAR, we do have

one more opportunity to get together for some fun networking, and there is much going on among the volunteer leadership in preparation for another great program year starting in September 2009.

Thomas Nordby, incoming chair, is busy leading the planning efforts for FAR for the 2009-2010 program year. Thomas will be leading the annual board retreat (held in a conference room in downtown DC) to discuss FAR’s strategic initiatives over the coming year. And Patricia Adkins, chair of the Program Committee is making great progress with the committee in coordinat-ing the breakfast and luncheon events start-ing in the fall.

I want to congratulate FAR’s new Board members for the 2009-2010 FAR year: Patricia Adkins, Home Safety Council (re-elected); Yasimin Al-Askari, Sun Trust Bank; David Akridge, American Inns of Court Foundation; Mary Bowie, American Association of Museums; and Jim May, National Association of School Financial Aid Administrators. FAR is blessed to have a great slate joining the Board for a two-year term.

As this is my final Chair Column, I wanted to again thank the volunteer lead-ers, staff, and members of FAR for all of your participation and support over the past year. I hope you are having a great summer, and we look forward to seeing you on July 25, and back at our first breakfast and luncheon meetings in September.

Regards!

Craig Silverio, IOM, CAEFAR Chairman, 2008-2009

Craig Silverio

In THIS ISSUe

member Profile – nancy Burns 4June Breakfast meeting 6Table Talk 7may Tax & legal Update 9member Profile – Sara Dispenza 10

D. C. Business license 11member Profile – Christine Cardinal 13real estate risk 14Financial reporting Survey report 18

—Bringing not-for-Profit Professionals Together— 3

Bank of America, N.A. Member FDIC. Equal Housing Lender . ©2008 Bank of America Corporation.

Our mission is to make sure you succeed.

Regardless of your size, location or mission, Bank of America is dedicated to understanding and serving your organization like no one else can. We offer a unique national platform of experienced not-for-profit banking specialists. Working together, they provide you with the technology, experience and financial strength to help you achieve your strategic objectives.

Put Bank of America to work for you. For more information, contact your Bank of America representative:

Maria Christofi Georges, 1.202.442.3956, [email protected] Agresti, 1.888.852.5000 ext. 1205, [email protected] Balloff, 1.888.852.5000 ext. 1980, [email protected]

You have a mission.

4

(continued on page 10, Burns)

Nancy Burns is a Relationship Officer in TD Bank’s Not-for-Profit Banking Division, working out of the bank’s regional headquarters in Tysons Corner. She

has 25 years of management experience, all in the Washington, DC region, and was recruited to TD in 2005 to lead the bank’s commercial marketing efforts in this region, with emphasis on Not-for-Profit banking and government contractor lending. She was promoted in 2007 to her current position in the Not-for-Profit group, where she is providing depository banking solutions to the tax-exempt marketplace. Her clients reflect the diversity of the nonprofit sector: trade and professional asso-ciations, large national charities, community-based organiza-tions, and more.

The daughter of a career naval officer, Nancy moved with her family many times during her youth. She was born in Key West, FL, and has lived in Providence, RI, Virginia Beach, VA, San Diego (twice) and Port Hueneme, CA and Honolulu, HI. She settled in northern Virginia following graduation from James Madison University, and lives in Centreville, VA.

Prior to joining TD, Nancy worked in the nonprofit sector as vice president of the Fairfax County Chamber of Commerce. During 15 years with the chamber she held various depart-ment and senior management positions, with responsibility

for marketing, membership recruitment and reten-tion, affin-ity programs, sponsorship development, public rela-tions, event planning, and finance and administra-tion. From developing the chamber’s first web site to implementing the first AMS system to overseeing the largest trade show in the organization’s history, she wore many hats while at the chamber!

Earlier in her career, Nancy held management positions with Hyatt Hotels and Marriott International. She also was an instructor for the Naval Military Personnel Command, provid-

meeT nanCY BUrnS – memBer ProFIle

Nancy Burns

Watkins, Meegan, Drury & Company, L.L.C. Proudly Serving the Not-For-Profit Community Since 1975

7700 Wisconsin Avenue Suite 500Bethesda, MD 20814

Dan O’Shea (301) 664-8165

[email protected]

www.WatkinsMeegan.com


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“How nonprofi ts and trade associations are weathering the economic challenges”

was the hot topic at the June Breakfast Program, hosted by Patricia Adkins of the Home Safety Council. This was the second of the new FAR breakfast programs which offers regular members the opportunity to discuss topics in more detail in a private setting.

Each member shared how their organi-zations were considering strategic alli-ances, exploring partnerships, revamping their strategic plans, incorporating virtual events, consolidating or subleasing offi ce space, and rethinking annual conferences as a way to reduce expenses and still gener-ate revenue or maintain giving levels.

The diversifi cation of revenue sources, reduction of expenses, and cost contain-ment were common themes during the discussion, and members shared their recommendations and resources on how their colleagues could achieve their goals in these areas.

The group stressed the importance of communicating honestly and regularly with staff, who are understandably anxious about how the economic downturn will affect their compensation, benefi ts, and workloads.

The breakfast was an opportunity for

members to share best practices and solu-tions in an open and frank environment. At the conclusion of the breakfast, Adkins asked if each person was leaving the ses-sion with at least one actionable idea or resource and the response was a resound-ing “YES.”

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Far memBerS SHare How THeY’re CoPIng wITH THe eConomIC CHallengeS aT THe JUne BreaKFaST Program

The discussion group at the second FAR breakfast session found many topics to share and as usual the network-ing among FAR members is an important result from all of the organization’s events.

. . .

. . .

7

TaBle TalKFAR welcomes new members:

Joseph BuyalosExecutive Vice President/ Principal The Insurance Exchange9713 Key West Avenue, Suite 401Rockville, MD 20850240-876-3566Fax [email protected]

rick KreterManaging Partner Kreter & Asasociates17505 Beauvois Blvd.Rockville, MD [email protected]

willem roosSenior Mnager SC&H Group, LLC8300 Greensboro Drive, Suite 700McLean, VA 22102703-287-6961Fax [email protected]

anthony ShelborneVice President, Finance and AdministrationNewspaper Association of America4401 Wilson Blvd., Suite 900Arlington, VA [email protected]

Toni SmithExecutive DirectorIn Reach, Inc.3102 63rd PlaceCheverly, MD [email protected]

denotes patron member

grF audit Partner Jim larson appointed to aSae’s Finance and Business operations Sec-tion Council

- On June 9, The American So-ciety of Association Executives appointed GRF Audit Partner Jim Larson, CPA, to their Finance and Business Opera-tions Section Council.

As a Council member, Mr. Larson will serve as a resource to the ASAE’s over 22,000 members, providing them with industry best practices and internal control enhancements gleaned from his nearly 20 years of accounting experience.

“I am very excited about the appointment,” said Larson, “I look forward to bringing something new to the table.”

Mr. Larson joined GRF after spending six years in the pri-vate sector in various financial management positions. As an Audit Partner with GRF, he is responsible for the planning, budgeting and directing of audits of large organizations, including associations and for-profit businesses. He interacts with management and board members to communicate management comments, audit findings and specific issues, including improvements in accounting and operating sys-tems and systems of internal control. He received his BS in Accounting and Finance from Florida State University.

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FAR held its May meeting at the historic Washington Club on Dupont Circle. The event

attracted a huge turnout with over ninety attendees. Speakers were Douglas Boedeker, CPA, CMA, with Tate & Tryon, and Jerry Jacobs, Pittsbury Winthrop Shaw Pittman LLP.

Boedeker began with an overview of what he would cover: recent federal tax

developments, including changes in laws/regulations, IRS areas of focus, and issues from recent audits; DC, Maryland, and Virginia tax developments, an overview of “FIN 48,” and an overview of FASB “Codi-fication Project.”

The new Form 990 was first up. Bo-edeker said that the filing of the new 990 has begun in earnest, and that initial tax preparation software glitches are getting fixed. He cautioned attendees to address the “Board Review” question early to smooth out preparation logistics. He then touched on employment tax reporting for single-member limited liability companies (SMLLCs) and COBRA premium deduction issues.

Boedeker than discussed the removal of the “Advance Ruling Period” for new charities, reporting that filing of Form 8734 is no longer required after the initial five years of a charity’s existence. The IRS will now use the data in Schedule A of the Form 990 to assess whether a charity has met the public support requirements.

maY Tax anD legal UPDaTe

New planned areas of focus by IRS Exempt Organization Division, as reported by Boedeker, include evaluation of data provided by the new Form 990; working on an EO voluntary compliance program (anticipated sometime in 2009); a “Chari-table Spending” initiative that will focus on charities with “unusual” fund raising levels or those reporting unrelated trade activity with low levels of program service expendi-tures; a “Gifts in Kind” initiative concerned

(continued on page 16, May Tax)

Doug Boedeker was the other speaker at the lun-cheon. The topic drew a large crowd to learn more

about the new Form 990.

Jerry Jacobs shared the program presentation work to cover tax and legal updates for FAR members.

10

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Sara Dispenza, CPA, originally from the Cleveland area, is an alumna of the Honors Tutorial College at Ohio University where she wrote her thesis on the convergence of domestic

and international accounting standards. She was recently the re-cipient of the 2008 Young Alumnus Award from Ohio University’s School of Accountancy and now serves as an Associate Advisory Council Member for the accountancy program at the University.

Currently, Ms. Dispenza serves as the Finance and Benefits Manager for the Eugene and Agnes E. Meyer Foundation. The Meyer Foundation is a generalist funder that concentrates its efforts in the Washington, DC area. At the Foundation, Ms. Dispenza is primarily responsible for the Meyer Foundation’s ac-counting functions. Ms. Dispenza also monitors new accounting pronouncements, coordinates the preparation of the operating budget, acts as the primary contact for staff concerning their benefits, and prepares and maintains schedules for tax returns and audits.

Prior to joining the Meyer Foundation, Ms. Dispenza was an assurance associate in the Private Company Services practice at PricewaterhouseCoopers and then worked at Chevy Chase Bank as an assistant vice president within the Financial Reporting De-partment as their accounting policy manager.

Ms. Dispenza currently is the Curriculum Chair for the Greater Washington Society of CPAs Nonprofit Symposium that will be held December 14-15th at the Mayflower Hotel. The Symposium

fulfills the educational requirements for approxi-mately 400 accounting professionals that serve nonprofits in the Greater Washington area. Sara was also involved as a member of the FAR program committee for the 2008–2009 period. In addition, Sara is a member of the American Institute of Certified Pub-lic Accountants.

In her spare time, Sara enjoys hiking, biking, and skiing (depending on the weather) around the DC metropolitan area. Ms. Dispenza is also a member of the undefeated softball team, Smell the Glove, which recently walloped the Pew Research Center. Sara’s other favorite hobby is to discuss all things relating to the great state of Ohio. Sara is also an avid traveler, a passion which developed as a high school foreign exchange student in Belgium.

meeT Sara DISPenZa - memBer ProFIle

Sara Dispenza

Burns, continued from page 4)

ing hands-on and classroom training in customer service to employees of U.S. Navy club facilities. In this role, Nancy was on the road 11 months out of every 12, travel-ing throughout the U.S., Europe and the Caribbean. She counts Scotland (castles!), Italy (handbags!) and Alaska (bald eagles!) among her most memorable stops.

Nancy is a member of ASAE and several chambers of commerce, and is a volunteer with the U.S. Army Women’s Foundation, providing marketing and commu-nications support. She also volunteers as a tutor for the Literacy Council of Northern Virginia, helping adults learn to read, write, speak and understand English.

An avid DIYer (do-it-yourself-er), Nancy spends much of her spare time on home renovation, interior design and gardening projects. She is currently undertaking the sec-ond of three planned bathroom remodels, and is looking forward to a relaxing soak in her new bathtub. . . .

. . .


ImPorTanT UPDaTe -- DISTrICT oF ColUmBIa’S general BUSIneSS lICenSe reqUIremenT

by Michael Tryon, CPA, Tate & Tryon

The District of Columbia has recently acknowledged that nonprofit membership organizations doing business only with their members are not required to obtain a D.C. Gen-

eral Business License (GBL). This clarification to D.C.’s expanded (and confusing) business licensing requirement has not been publicized by the District, nor is it posted on the Department of Consumer and Regulatory Affairs (DCRA) web site. Neverthe-less, this policy change has been confirmed through discussions with Juva Hepburn, Acting Program Manager of DCRA’s Business License Division. DCRA has apparently been returning GBL appli-cations from membership associations, and reportedly will send refunds to eligible associations that previously filed for licenses, upon request.

It is very important to note, however, that the GBL exemption does not apply to membership organizations that also conduct business in D.C. with nonmembers. If a membership organization provides services in the District that includes both members and nonmembers, it is DCRA’s position that a GBL is required, and must be obtained. The key, explained Ms. Hepburn, is the solicita-tion of or provision of services to “the public” -- that is, to District residents or businesses. Any non-charitable membership organiza-tion that does business with nonmember individuals or businesses in the District of Columbia falls under the new GBL requirement.

Following are several examples to help explain the “solicitation or provision of services” concept:

ABC Organization is a section 501(c)(4) membership organiza-tion located in the District of Columbia. In addition to providing various member services, ABC publishes a monthly magazine that includes advertising. ABC accepts advertising for the magazine from numerous local businesses - none of which are members - including some located in the District. Because it is doing business with District-based nonmember businesses, ABC Organization would be required to obtain a GBL from DCRA.

The facts are the same as in No. 1, except that none of the busi-nesses solicited for advertising are located in the District, nor do any District-based businesses place ads in the magazine. Because it is not conducting nonmember business with the within the Dis-trict of Columbia, ABC would not be required to obtain a GBL.

The facts are the same as in No. 1, except that all businesses solicited for advertising purposes, regardless of where they are located, are ABC Organization members. Because it is not solicit-ing business from nonmembers, ABC would not be required to obtain a GBL.

XYZ Association is a section 501(c)(6) business league head-

quartered in Alexandria, VA; it does not have an office in the Dis-trict. XYZ provides industry consulting services to local businesses. Several of the local businesses to which services are provided are nonmember business located in the District. Because it provides services to District-based nonmember business, XYZ Association would be required to obtain a GBL.

The facts are the same as in No. 4, except that XYZ does not solicit nor provide any consulting services to businesses located in the District. Because it is not soliciting business from, or providing services to, District-based businesses, XYZ would not be required to obtain a GBL.

Charitable organizations that solicit contributions from District residents are not required to obtain a GBL, but instead must apply for a District of Columbia Charitable Solicitation License (CSL). Both the CSL and the GBL are a type of Basic Business License.

Organizations with questions regarding the District’s GBL requirement should contact the Department of Consumer and Regulatory Affairs at (202) 442-4400.

Anthony A. Cuozzo, Jr., CPA, CGFM and Director of Not-for-Profit [email protected]

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Christine Cardinal, originally from El Paso, Texas is an alumna of St. Mary’s Univer-

sity located in San Antonio, Texas and Texas Tech University. Over the past thirteen years, she has worked in banking almost exclusively with not-for-profit organizations. Christine’s primary responsibilities are to assist not-for-profit organizations with their financing, investment, and cash man-agement needs.

She is currently a Vice President in the Not-For-Profit Banking Group at Chevy Chase Bank, which is now a wholly owned subsidiary of Capi-tal One. Her banking career began at NationsBank in Texas where she learned as an underwriter about the oil and cow farming business. Chevy Chase Bank has been a member and supporter of FAR since 2006.

Prior to being in banking, Christine

worked as an accountant for a sole practitioner for two years. Christine lives in Leesburg with her husband and two-year-old son and is expecting a daughter in August 2009.

Christine is an active member of ASAE and is on the planning com-mittee for the Financial Business Operations Symposium and is on the steering committee for the Sum-mit awards. She had recently joined the program committee for FAR and hopes to be further involved with FAR in the future.

Professionally, Christine achieves satisfaction by providing creative financing and cash management solutions one customer at a time and is most rewarded when she is able to create costs savings that can then be reinvested in the mission of the not-for-profit organization.

For fun, Christine is studying Latin

and enjoys hiking with her family. Her favorite place to vacation is in the Southwest either in the Santa Fe/Taos area or in Flagstaff.

meeT CHrISTIne CarDInal - memBer ProFIle

Christine Cardinal

. . .

14 14

By Eric West, LEED APPrincipal, West, Lane & Schlager Realty

Advisers

In the 1980’s “Crazy” Eddie Antar’s commercials shouted to viewers, “at prices like these, we’ve got to be IN-SANE!” Today, that mantra seems to apply to everything – designer clothes, houses, cars and yes, commercial office leases. During the past nine months, the District’s office leasing market has shifted from landlord-con-trolled to tenant-dominated.

Prelude to a Fall:If your organization has a lease

that expires in the next 24-36 months, you’re in a great position. For the first time in over a decade, you have the opportunity to renew your lease or even secure new space at a lower price than your current, in-place rent. The current climate also presents great buying opportunities, characterized by lower rents, much higher landlord concessions including increased tenant improvement allowances and free rent.

Why is this happening? The answer is a combination of over-supply, free falling demand and depressed con-struction pricing.

While all professional service firms have expanded during the last ten years, no industry group has grown as rapidly as law firms. Over the last decade, the 100 largest law firms (as defined by the ALA) leased, on aver-age, 1.2 million square feet of office space per year in Washington, DC. While some of the activity was lease renewals, most was new space. By 2004, organizations requiring more than 50,000 square feet faced a situa-tion where other tenants outnumbered available options. As a result, large tenants “defensively” pre-leased of-fice space in an effort to protect their future space needs.

While large tenants have always pre-leased space in new developments, the pace of law firm pre-leasing in

the Central Business District and the East End (the “core” office markets), reached a cyclical peak by 2006. In fact, law firms pre-leased 26% of all new space in the 2004-2008 period. What happened next is the textbook example of a supply and demand imbalance. And while this story of dis-proportion center mainly around law firms, not-for-profits with upcoming lease expirations are the organizations who can benefit greatly.

Canary in the Coal Mine:As law firm pre-leasing actively

increased, a seldom-discussed prob-lem occurred; landlords cannibalized future office space demand. By 2007, every top 100 law firm with lease expi-rations in 2008 and 2009 was commit-ted to a new lease. By 2008, of the top 100 law firms with lease expirations in 2010, only 450,000 square feet was

wITH oPPorTUnITY ComeS rISK

(continued on page 18, Risk)

not yet committed. These numbers indicate that demand may not return to the 10-year average of 1.2 million square feet of new, uncommitted space until 2011.

By late 2007, something else was happening: landlords were starting to offer free rent and were even buying out existing leases in order to secure tenants for buildings. Although done on a limited basis, lease buyouts were an early warning that supply and demand was out of synch. And that assumed that demand would remain in-tact.

As we all know, demand is now in free-fall as the largest firms are reduc-ing staff, cutting spending and re-engi-neering their operations.

Unfortunately, developers cannot stop construction once underway, and construction is an 18 to 36 month pro-

15

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The Clear Choicefor the Not-for-Profit Community

For close to 100 years, BDO Seidman has served the not-for-profit community. Ourteam of professionals offers the hands-on experience and technical skill to serve thedistinctive needs of our not-for-profit clients—and help them fulfill their missions.Based in our Greater Washington, D.C. Metro office, the BDO Seidman Institute forNonprofit Excellence supports and collaborates with BDO Seidman offices aroundthe country to develop innovative and practical accounting and operational strategiesfor the tax-exempt organizations they serve. The Institute also serves as a resource,studying and disseminating information pertaining to not-for-profit accounting andbusiness management.

Joyce Underwood, CPABDO Seidman, LLP7101 Wisconsin Ave., Suite 800Bethesda, MD 20814-4827(301) 654-4900 / www.bdo.com

Bethesda-FAR-NewsletterAd 1/27/09 11:30 AM Page 1

with “puffery” related to valuation of donations; “Governance” initiative to look for data to support the assertion that “a well-governed organization is more likely to be compliant with the tax law.” In ad-dition, the IRS will look at executive com-pensation, taxability of mailing list rental revenue, cost sharing between 501(c)(3) and 501(c)(4) organizations, and the “educational” nature of an organization’s advocacy mailings.

Boedeker briefly touched on state devel-opments, saying that all three jurisdictions will have tax amnesty or voluntary compli-ance programs offering reduced penalties and interest on unfiled returns.

Jerry Jacobs’ part of the program was devoted to Form 990 governance issues, FTC antitrust settlement, D.C. business license, and nonprofit mergers. Jacobs reported that the goals for the Sarbanes-Oxley Act for Exempt Organizations was public disclosure and governance reform,

which was effectively demanded by Congress. While this act mostly concerns major new accounting/auditing obliga-tions, it also contains significant legal/governance issues. There is a specific requirement for (1) a conflict of interest policy that facilitates disclosure of infor-mation that may help identify conflicts of interest and specifies procedures to be followed in managing conflicts of interest; (2) a whistleblower policy that specifies that the organization will protect the person from retaliation and identifies where such information can be reported; (3) a document retention and destruction policy that identifies the record reten-tion responsibilities of staff, volunteers, members of the board of directors, and outsiders for maintaining and document-ing the storage and destruction of the organization’s documents and records; (4) a policy on the process for determin-ing compensation that addresses the chief employed executive and/or other officers and key employees; and (5) a joint venture policy (contingent upon there being joint

ventures.Jacobs also explained the FTC antitrust

settlement in the matter of the National Association of Music Merchants where it was alleged it regularly discussed prices, discounts, and RPM and said the rul-ing was that there was no allegation of antitrust violation. The FTC issued a press release and consent order requiring singu-lar compliance program whereby counsel reviews all board, employee, and agent speeches related to prices and provides annual training to the board, employees, and agents.

Regarding D.C. General Business Licenses, Jacobs reported that the District has ceased issuing these licenses to non-profit organizations, although charities are still subject to charitable solicitation registration and reporting. All who filed must now seek a refund.

Jacobs concluded by saying the recess-ing is no time to cut corners legally and to watch for legal landmines in recessionary-driven policies and programs.

(May Tax, continued from page 9)

. . .. . .

17

(New Fall Season, continued from page 1)

LoCastro, JD, CPA, Principal, Non Profit Tax, Gelman, Rosenberg & Freedman, CPAs. Panelists will address what each has learned from clients.

Come hear from your fellow FAR Members, who also happen to be CPAs who specialize in providing 990 and other related CPA firm services to nonprofits and asso-ciations, share with you the good, the bad and the ugly about the lessons learned from filing or shall we say, trying to file, the redesigned Form 990.

Our CPA professionals will not only share stories first hand of how their clients have fared and/or are currently still dealing with this (for those on extension), they will provide tips on what to do/not to do, resources to assist you and your fellow senior management professionals and Board Members, and more!

This should be a very lively, exciting and hot topic to discuss as we kick off the FAR program season and wel-come in the (hopefully) cooler fall weather!

On October 21st FAR will present How to Use So-cial Media to Connect, Communicate and Collabo-rate. Social media is the new paradigm that is changing organizations forever. The instant and widespread access to information creates new challenges and opportuni-ties for associations and nonprofits. No organizational department or activity is unaffected by the effects of social media. Explore how associations are using social media and how your organization can benefit from partaking in this new two-way communication.

You’ve heard about various social media spaces, like Facebook, LinkedIn, Twitter – but why are they relevant to your organization? How do you develop a social media strategy? Where do you start, and which tools should you pick?

This presentation is designed to provide a high level overview of what social media strategy is all about, as well as show case studies from associations who have gotten started – using the strategic goals and objectives they have defined. From membership recruitment and retention, to education and events, to running an advocacy campaign and more, clearly defined objectives will help you decide how to start and what metrics are important in order to measure success.

We’ll delve into content strategy – how you feed the social media machine, as well as operational integration – how you manage the resources internally in order to share the load. We’ll show you how to manage risk and how good social media policies can create a safe space for all your stakeholders, staff and members to connect, com-municate, and collaborate.

FAR has two speakers lined up from SocialFish, LLC. Maddie Grant is the Chief Social Media Strategist and Lindy Dreyer is the Chief Social Media Marketer. Both

speakers have experience in helping clients learn about and use social media in not-for-profit associations. Mad-die has written articles for a number of publications and speaks frequently. Her popular blog, SocialFishing..., covers the intersection between social media and associa-tion management. With more than 10 years of experience in marketing using both traditional and new media, Lindy has now emerged as one of the leading voices for asso-ciation marketing. Her blog, the Association Marketing Springboard, combines progressive marketing techniques with practical ideas that association marketers can imple-ment in their own work.

HR Trends and Issues in the Workplace will be pre-sented on November 18th. Though many different trends are consider important by human resource management professional, over the past several years a number of key forces continue to keep coming up. Some of these include:

rising health care costsnew technologies and greater dependence on tech-

nology to communicate with employees.Increased global competitiveness and the need for an

educated & skilled workforce.Safety and security from natural disasters, terrorism,

cyber attack and intellectual property protection.(continued on page 19, New Fall Season)


cess. Given the demand pipeline and the overabundance of development capital, real estate developers began building over 17 million square feet of new projects during the last five years. These projects worked well as demand outpaced deliveries, but by the middle of 2008 demand literally fell of a cliff. Whereas for 15 years the Washington, DC office market grew by more than 2.3 million square feet per year, in 2009 the market grew by only 465,000 square feet.

The “Aftereffect”:

Today, almost 10 million square feet of new space is under construction in the District of Columbia and sched-uled to deliver during or before 2011. While these projects were conceived in a growth cycle they will deliver in a period of oversupply, falling demand and lower construction costs. For not-for-profits, the result is a window of opportunity to secure space at the bottom of real estate cycle.

Net effective rents, which were increasing by more than 3.5% annu-ally, are now coming down. In the first half of 2008, rents increased by 1.9%, and then began falling after July. Asking rents are now falling across the board. Last year the cost for existing, Class A space in the Central Business District was in the range of $50.00 - $65.00 per square foot, with a land-lord construction allowance of $45.00 - $60.00 per square foot. Today, that same space will cost $45.00 - $60.00 per square foot, and the concession package, including allowances and free rent is in the $70.00 - $90.00 per square foot range. On average, this represents a 15% cost reduction over the term of a 10 year lease.

This downward trend will persist as construction prices continue to fall. A year ago, landlord concessions were approximately $50.00 per square foot and construction costs were in the $50.00 - $100.00 per square foot range. Therefore, if a tenant needed

(Risk, continued from page 14) anything beyond a basic renovation, they had to pay out of their pocket, and also pay for other typical reloca-tion costs such as furniture and equip-ment.

The combination of higher rents and steep out of pocket costs forced the hand of most tenants to renew. Even if renewing a lease is not the preferred option, the price premium of moving was too large to justify. Therefore, tenants moved only as a last resort, not a as a alternative to staying in-place. Existing landlords knew this and fully exploited the situation.

Today, material costs are less than last year and labor costs are down considerably. For the vast majority of tenants, the cost of building new space is at, or close enough to the landlord’s allowance that moving becomes a more realistic consideration. As a result, tenants can effectively leverage their existing landlord with the threat of moving.

The ability to secure favorable leases is not limited to financial terms. Landlords are now agreeing to lease structures that significantly and positively impact a tenant’s opera-tions, such as a cap in real estate tax increases in the event a building is sold; specific and favorable expansion rights; modifications to the base build-ing systems; termination options; etc.

Four Protective Measures to Avoid Serious Problems:

While we are now in a classic “buyers” market, this is not a text-book downturn. Not-for-profits must be aware of the risks involved when leasing space in today’s market and structure their leases to ensure that prospective landlords perform on their obligations. Why is this market so dif-ferent from other downturns? Unlike other downturns, this is a universal downturn of both lenders and land-lords. And, if a lease is not properly structured, a tenant risks unantici-pated costs, protracted litigation and even the possibility of being forced out of their space by the lender. To avoid

serious problems, not-for-profits and their representatives should:

1. Scrutinize the landlord and its lender: Landlords have always scrutinized tenants during the lease negotiation process. They analyze the tenant’s business model, sources and uses of income, operating history and leadership. And with large mortgages tied to a tenant’s ability to pay its rent over the term of a lease, landlords were prudent and justified in doing so.

Beyond inquiring about the landlord’s reputation as an owner and manager, however, tenants (and their brokers) rarely spend much time evalu-ating the landlord’s ability to perform on the lease. And, except in a pre-lease situation or where a large tenant is go-ing to be a lead tenant, most tenants did no more than a cursory evaluation of a building’s financial sponsorship. Today, this research is critical for all tenants.

2. Structure the lease to minimize risk: Many tenants and their brokers have never been through a downturn, and therefore have not experienced a situation where a landlord cannot perform on the terms of the lease. The traditional broker’s assumption is that a non-disturbance agreement protects the tenant from a landlord default. Wrong.

A subordination and non-dis-turbance agreement (“SNDA”) is simply an agreement on the part of the current lender that recognizes the lease. So, if a landlord defaults on its mortgage and the lender takes con-trol of the property, the SNDA allows the tenant to continue occupying the space per the lease. Absent this agree-ment, the lender may have the right to terminate the lease (i.e., increase the rent) or evict the tenant. The SNDA does not necessarily obligate the lender to perform the landlord’s financial ob-ligations in conjunction with the lease; therefore, lenders may not be obli-gated to fund allowances and other landlord concessions.

Tenants should closely review


. . .

SNDA forms. Typical SNDA forms expressly exclude unfunded allowances or landlord’s work. In essence, the lenders want no additional financial obligations. Therefore, if an allowance is significant, tenants need to consider other protective mechanisms, such as (i) escrowing funds (ii) gaining com-mitments from the landlord’s lender to expressly fulfill obligations, (iii) obtaining third party guarantees from the landlord’s principals (such as a general partner or individual partners), (iv) attaining express offset rights (all of which should be acknowledged in the SNDA if possible). In some cases, tenants could even attempt to secure a completion bond from the landlord.

3. Engage the lender in the nego-tiations: In this market, negotiating business terms should not be limited to landlords and tenants. Larger, lead tenants and / or tenants that are enter-ing into a build to suit lease need to engage in three-party negotiations that include the lender. In this manner, the lender is engaged early on; thereby maximizing the probability that all parties will perform according to the terms outlined in the lease.

Once a lease is signed, tenants cannot simply walk away without significant legal and financial pen-alty. However, lenders have the right to consent to a lease after a tenant’s execution. And in some cases, tenants have negotiated seemingly favorable leases only to be rejected by the lender (not the landlord). Therefore, to the extent possible, tenants should request that the lender sign off on the final letter of intent, alongside the tenant and landlord. And at the very least, it is prudent to request that the lender consent to the business before negoti-ating the lease.

4. The lender is your partner, too: When negotiating the letter of intent and the lease, tenants should attempt to gain the lender’s consent on a range of protective issues, such as:

Have the right to offset the rent

(New Fall Season, continued from page 17)against a landlord default, which is sometimes referred to as a “self-help” provision. This provision is especially relevant in the era of large landlord allowances and tenants who manage their own construction. If a landlord fails to pay the tenants contractors per the lease, the self-help provision allows the tenant to pay the contractors in lieu of rent, until the debt is satisfied. The lender should be a party to this provision.

Have the landlord post a security deposit. While landlords (and their lenders) require tenants to provide security deposits and other forms of performance guarantees, landlords are only expected to perform according to the lease contract. In the future, ten-ants may want to require landlords to post a guarantee of performance in the form of a letter of credit equal to the cash allowance. This is the best case situation because the letter of credit is protected in a bankruptcy proceeding.

Insure the allowance and / or the landlord’s work. This is a subset of the landlord security deposit. In some cases, tenants may require a landlord to post a completion bond (insurance) to cover the amount of the allowance, and, more specifically, to guarantee the landlord completes promised construction – base building, tenant-specific improvements, etc.

The most aggressive position would be to secure a lender guarantee to complete construction in the event the landlord cannot perform on its obliga-tions. This guarantee should be an exhibit to the lease.

The Window of Opportunity is Wide-Open for Tenants:

For tenants, the next 12-24 months will offer a unique opportunity to lock into long-term cost reductions. How-ever, not-for-profits must remember to incorporate protective measures in their leases, because as the old com-mercial says, “at prices as low as these, we’ve got to be INSANE!

Demographic changes, especially the aging workforce and beginning of the retirement of the baby boom generation.

How have these themes changed since the shift into global recession in 2008? How the President and Con-gress suggested changes affect some of these trends? In what dosage (quickly or over time) will the changes come and most importantly what do CFO, COO, CEO and human resource pro-fessional do to prepare for or influence the outcome these potential changes?

This program is designed to provide perspective and knowledge to key human resource leaders in our not-for-profits, foundations and patron companies on the current workplace trends anticipated by the human resource profession. In addition you’ll hear how the current suggested federal policy changes are likely to affect your company or not-for-profits human resource function and future business operations. . . .

20

2009 Financial Reporting Survey Report of Findings

The American Enterprise Institute for Public Policy Research developed this survey to poll local not-for-profit organizations about budget preparation and actual financial reporting to their Boards of Directors. The purpose of this survey was to discover common and best practices among these organizations.

The primary sample group was the Finance and Administration Roundtable members and a select group of other not-for-profit agencies. The survey was open from March 26, 2009 to April 14, 2009. Participation was voluntary and individual responses are confidential.

While organizations differ in a lot of ways, many of the practices are very similar as indicated in the findings presented below.

GENERAL INFORMATION

Q1: Is your organization a member of the Finance and Administration Roundtable? A:

• 86 total responses • 60 or 69.8% from FAR members

Q2: What is the name of your organization? A: Respondent names are being held confidential

Q3: How would you describe your organization? A:

• 48 or 55.8% are trade associations • 26 or 30.2% are charities • 12 or 14.0% are think tanks, schools or other types of organizations

Q4: What year was your organization founded? A:

• The oldest organization was founded in 1817 • The newest organizations were founded in 2004 • The average age of the responding organizations is 56 years

Q5: What is your annual expense budget? A:

• Annual expense budgets range from $195,000 to $600,000,000 • The average expense budget size is $25,000,000 (median budget $9,200,000)

June 2009 Page 1

21

2009 Financial Reporting Survey

June 2009 Page 2

Q6: Number of full time equivalent (FTE) employees? A:

• The number of employees ranges from 3 to 1,600 • The average number of employees is 98.5 (median number of employees is 39)

Q7 & Q8: Where is the organization’s headquarters located and do you have other locations?

A: • 54 are headquartered in DC, 25 in VA and 6 in MD • 31 or 37.8% of respondents had locations outside of the DC, VA, MD area • Think Tanks are most likely to have multiple locations, 5 out of 8 or 62.5% • Charities are more likely (13 out of 26) than Trade Associations (11 out of 48) to have

multiple locations

Q9: On what date does your fiscal year end? A:

• 41 end on December 31 • 17 end on September 30 • 16 end on June 30 • The type of organization (charity, trade association, etc.) did not have a significant impact

on the organization’s fiscal year end

Q10: Does your organization perform its general accounting functions in-house, or is it outsourced?

A: • Almost all, 96.3%, reported performing accounting functions in-house and 88.9% also

reported outsourcing payroll processing.

Q11: Please express the amount or ratio of revenue or funding that your organization receives by category (i.e. Membership, contributions, sales of products, etc).

A: • Almost all organizations have a variety of funding sources • Membership and Conferences are the primary source of revenue for Trade Associations • Contributions are the primary source of revenue for charities

Q12: Which software applications do you mainly rely on for general ledger, membership, billing, human resources and payroll?

A: • 37 organizations use a Microsoft Dynamics product – Solomon, Great Plains, Navision • 16 use Sage • 10 use Intuit • 5 use Blackbaud products • 4 use Deltek • 3 use Oracle • 1 uses Sun

22


June 2009 Page 3

• The diversity or concentration of revenue did not appear to have a correlation with the choice of software packages

• Charities show more diversity in software choices than Trade Associations • Intuit and Sage products are found more frequently among organizations with the

smallest annual expense budgets. Microsoft is not the general ledger software for any respondent with an expense budget less than $5 million. Large organizations show greater diversity in software packages

• More recently formed organizations have a higher concentration of Intuit software while Microsoft tends to be the choice of older organizations

Q13: What other systems do you use and for what purpose? A:

Marketing / Development / Grant management / Contacts / Events Blackbaud Raisers Edge Blackbaud Prospect Edge MicroEdge Gifts Seregenti Tracking Salesforce.com NETForum Goldmine Constant Contact IMIS and ISGweb for IMIS Cvent Ektron Citysoft Easy Grants GovWin ACT Get Active Highwire Schedulall

Other Software PaperSave – document management Replicon – expense approval and tracking Vocus - payroll AMS – insurance agency management SAS – research Cognos – budgeting RecoveryPAC – business continuity planning InterPoint – file maintenance Forecaster - budgeting Active Planner ATX – tax reporting

23


June 2009 Page 4

BUDGET INFORMATION

Q14 & Q15: Do you account for revenue on a cash or accrual basis? And do you prepare the revenue budget by fund or initiative?

A: • 88.5% prepare revenue budgets on an accrual basis • 59.2% prepare revenue budgets by fund or initiative. This is not particularly correlated to

the size of the organization • Trade Associations are equally likely to break down revenue as to present it in total • Charities are more likely to break revenue by fund or initiative

Q 16: Do you budget expenses on a cash or accrual basis? A:

• 83.1% prepare expense budgets on an accrual basis

Q17: How do you handle investment income in your budgeting process? A:

• 36 organizations do not include investment income in operating income for budget purposes

• 21 include investment income in operating budgets • 16 include a projection for realized investment income but do not project unrealized gain

or losses

Q18: How do you handle draws/disbursements from endowment funds in your budget? A:

• 5 draw a fixed amount annually • 15 draw based on percentage calculations • The remaining respondents either don’t have endowment funds or draws are determined

by the Board

Q19 & Q20: Do you prepare and present a capital expenditure budget? How far into the future?

A: • 57.1% do and 42.9% don’t • Depreciation is generally included in the budget • Only 14 respondents indicated they prepare capital budget for periods longer than one

year

Q21 & Q22: Do you present a cash flow projection to the Board or Audit or Finance Committee? How far into the future?

A: • 67.1% don’t prepare cash flow projections for the Board or Committees • Several indicated they talk about cash with senior management on a regular basis • Typically focus on the current year

24


June 2009 Page 5

Q23 & Q24: To what level of detail is the budget presented to the Board? Finance Committee?

A: • 90.8% present a minimum or informative amount of detail to the Board. • 93.2% present an informative or maximum amount of detail to the Finance Committee

Q25: Does your organization build / load the budget into a financial software package, or do you generally rely on an Excel spreadsheet based budgeting / forecasting tool?

A: • It appears that most organizations use Excel to build the budget and then load the data

into their financial software package

Q26: Would you be willing to share your budget formats. A: There was insufficient response to this question

ACTUAL FINANCIAL INFORMATION

Q27 & Q28: Do you present actual revenue on a cash or accrual basis? By Fund? A:

• 84.9% present actual revenue on an accrual basis • 55.6% present actual revenue by fund

Q29: Do you present actual expenses on a cash or accrual basis? A:

• 83.8% present actual expenses on an accrual basis

Q30: Do you prepare and present a capital expenditure activity and variance to budget? A:

• 66.2% do not prepare capital expenditure reports

Q31: Do you present a cash flow activity and variance to budget? A:

• 65.3% do not prepare cash flow activity and variance to budget reports. • There is an indication that cash flow reports are prepared by not compared to budget

Q32 & Q33: To what level of detail is actual activity presented to the Board? Finance Committee?

A: • 94.6% present a minimum or informative amount of detail to the Board • 88.9% present an informative or maximum amount of detail to the Finance Committee

Q34: How often do you share information with the Board? A:

• 50.8% share quarterly • 27.7% share monthly

25


June 2009 Page 6

• 16.9% share half yearly • 4.6% share bi-monthly

Q35: Would you be willing to share your internal financial reporting formats. A: There was insufficient response to this question

Q39 & Q40: To who are the results of the annual audit presented? The full Board? The Finance/Audit Committee? And to what level of detail?

A: • 78.7% to both the Committees and Board • 92% present an informative or maximum level of detail about the audit

ACCOUNTING DEPARTMENT STRUCTURE

Q36: How is your accounting department structured? A:

• The average size of the Accounting department is 4.2 FTEs based on the 67 responses received

Q37 & Q38: Do you have a position dedicated to reporting on grant activity? If yes, is the position in the Accounting Department?

A: • Only 23.9% have a dedicated position • 47.8% of those positions are in accounting

ACHKNOWLEDGEMENT

Special thanks go to Mindy Saffer of West, Lane & Schlager and Ryan Walsh of AdamsGrayson whose contributions were vital to the success of this endeavor.

new fall season program info€¦ · director of nonprofit services, bdo seidman, llp, and richard...

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